Selling Assets To Reaffirm Home Mortgage - Bad Move?

[Broke2011]

My wife and I own a business that was hit hard by the 2008 recession. We have avoided bankruptcy until now, but we have two creditors - Chrysler and Chase - that are pushing us into a corner with pending lawsuits and/or judgements. So we believe now is the time to file bankruptcy.

Here's the catch: If we sell enough assets to catch up on $15,000.00 in mortgage payments between now and the time we file for bankruptcy, will that show up as income? If so, it might push us over the income limit for the past six months. Also, would it violate Chapter 7 requirements to sell assets prior to filing? We have to catch up on the mortgage payments to be able to reaffirm, and we want to reaffirm because our business is also in the home. A move would only disrupt the progress it has been making recently, along with pushing our two kids into a different school district.

Also, I saw this reply on one of the sticky threads - can anyone explain how this could be possible?

And it is really sad when people didn't have to reaffirm to stay in the house anyway.

Can you stay in your home and go through Chapter 7 without reaffirming? If so, how would you go about it - just not list the home in the bankruptcy?

Any thoughts or tips?

[iv65536]

What you would be looking for is a "ride-through" - you would continue paying the mortgage in spite of the fact that your personal liability would be discharged. You would list your home as an asset and the mortgage(s) as debts on the petition.

As for the arrearage, you may find that a Chapter 13 case may be a better option for what you want to do.

[Broke2011]

Thanks but that really doesn't answer my questions.

[IBroke]

My wife and I own a business that was hit hard by the 2008 recession. We have avoided bankruptcy until now, but we have two creditors - Chrysler and Chase - that are pushing us into a corner with pending lawsuits and/or judgements. So we believe now is the time to file bankruptcy.

Here's the catch: If we sell enough assets to catch up on $15,000.00 in mortgage payments between now and the time we file for bankruptcy, will that show up as income? If so, it might push us over the income limit for the past six months. Also, would it violate Chapter 7 requirements to sell assets prior to filing? We have to catch up on the mortgage payments to be able to reaffirm, and we want to reaffirm because our business is also in the home. A move would only disrupt the progress it has been making recently, along with pushing our two kids into a different school district.

Also, I saw this reply on one of the sticky threads - can anyone explain how this could be possible?



Can you stay in your home and go through Chapter 7 without reaffirming? If so, how would you go about it - just not list the home in the bankruptcy?

Any thoughts or tips?

Let's see: Selling assets shouldn't be an issue. IMO, you are just converting property you already own into cash. But that cash certainly is subject to the BK-limits as ASSET - but NOT as INCOME.
A mortgage is a secured loan so the payment wouldn't be a "preferential payment" either. If you decide to pay your mortgage with it, it's gone and not an asset any more.

Now the reaffirmation:

It's a good idea to catch up with the mortgage if you want to keep the home - but honestly, there is no reason to reaffirm. Just note on your petition that you intend to reaffirm but simply don't sign the agreement. If you stat current, that should take care of it. In addition, if you owe much more than what the house is worth, it's likely your reaffirmation will be rejected either by your attorney or by the judge (or by both of them).

You have the list EVERYTHING in the petition. The house as asset and the mortgage as debt - just as iv65536 mentioned.

[debee]

Also, I saw this reply on one of the sticky threads - can anyone explain how this could be possible? Can you stay in your home and go through Chapter 7 without reaffirming? If so, how would you go about it - just not list the home in the bankruptcy? Any thoughts or tips?

I was hoping Tom would drop into this thread with an answer since you were quoting him in your original post...

The idea as IBroke explained is to indicate "reaffirm" on your statement of intentions (your other options being surrender or redeem) and then should the lender send a reaffirmation agreement, don't sign it. Some lenders don't bother sending reaffirmation agreements anyway.

You need to get current before you file and then just stay current on your loan, insurance, and taxes because the lender has to abide by state law in terms of foreclosure.

As for selling things, I would talk to an attorney before doing anything. As IBroke pointed out, selling an asset that isn't exempted and putting the cash into one that is might create a problem.

Also, when you say it might put you over in the 6 month lookback do you mean you would fail the means test or just become an over-median filer? Being over the median doesn't preclude you from successfully filing a chapter 7.

Also, lots of people fail the means test in their trial run and then with some reconsideration, pass it when it counts.

[tcreegan]

Hi all, Hi debee, thanks for the heads-up...better late than never?


Hi Broke, my best thought and/or tip would be to not sell off 15K of your assets to pay the mortgage arreage, sell off 2K and hire a good BK attorney...someone who knows their way around a business and personal Ch 7 and Ch 13. Lot of folks here w/ plenty of experience, but when you're putting 15K, the business and the house on the line...I would want a pro backing me up.

I suspect you have more options than you might think.

Good luck w/ it,

Tom in Colo